The financial market, new financial products in Ukraine started momentum. New perspectives came around for the business development. People become more literate, start counting, saving, and more often go to leasing companies by leaving regular cash loans. In Europe, real property leases work well: a client comes, chooses an apartment, makes a pre-payment, pays lease payments and becomes an apartment owner after all payments are made. Yachts, load-carrying vehicles, HoReCa and a lot more are in demand. We will speak with Pavlo Olegovych Mukhin, General Director of TEKOM-Lease, about the market perspectives, novelties and classical offers.
• Pavlo Olegovych, I suggest we should start our talk by estimating the status of the leasing market as compared with the last year in terms of supply-demand.
Sure, a top-performing period could be observed in the pre-crisis times in 2013-2014. The activity began falling as early as in 2015-2016. The leasing market status is estimated by the cost of concluded agreements. If in 2014 the total amount was 40 billion UAH, in 2015 it was about 30 billion UAH, and 22,6 billion UAH in the last year. According to the figures, we can see the downfall. The second moment is that the validity term of the agreements signed earlier has expired in this year. It also influenced the statistical downfall. But there is a good trend of an increased number of agreements too. About 9 thousand had been concluded for the last year. Presently, the main leasing business includes motor vehicles and agricultural machinery and equipment. Thus, 70 % of 22,6 billion UAH of the portfolio was motor vehicles in 2016, 28 % was agricultural and specialised machinery. It should be pointed out that 5800 motor vehicles is the highest penetration to the car market for the whole history of leasing in Ukraine. It is 8.3 % of all sold cars or every twelfth car.
• Please tell us about the fundamental differences of car loans and leases?
They are two absolutely different financial instruments. Car lease is a complex service: you sign one lease agreement and do not have any more additional payments; everything is done by the leasing company. After the last payment under the agreement, the car ownership right vests in you. It is a fundamental organisational distinction. And loans and credits are just money for buying a car. There is another third option – rent: when you use a car and then give it back. All these services exist in Ukraine, but our people prefer leases or car loans more. And among the leasing services, car lease is the most popular service. More and more people want to conclude lease agreements. Cars may be acquired under more beneficial terms because the leasing companies do not have such strict terms as banks do.
• Regarding rights and obligations of a leaseholder – what does the required program include?
The same rights as the owner has, excluding the right of disposal. There are many obligations: the main one is to pay lease payments when due, to take care of a facility, to follow the servicing rules. But there are no special obligations.
• What main and additional services does the leasing company offer for a client` comfort?
The idea is that a client signs just 1 agreement, everything else is done by the leasing company – insurance of a facility, object, additional maintenance, insurance adjustment by the leasing company without involving a client. Besides, if the company has some agreements with a manufacturer, it may provide its client with a discount for a car. Our company is more specialised in corporate business. For instance, we work with supplies of agricultural machinery and equipment: we may bring it, perform customs clearing, carry out its maintenance and deliver for servicing.
• And how are the relations with insurers built? And who deals with the leased machinery maintenance?
All the insurance matters are settled by the leasing company. The maintenance is carried out by a client, but the company watches whether everything is done in time.
• Main risks of the leasing companies: what are they, and what protection is prescribed?
The main risk is, of course, non-payments. The second risk is liquidity, i.e. loss of the facility cost, and the third is loss of the facility. The last of the said risks is secured by an insurance company. As regards the second risk, there are 2 ways of protection: to increase a leaseholder`s advance payment and to sign a trade-in agreement with a facility supplier. Going back to the main risk of non-payments, it levels out by a thorough examination of a client`s financial state, credit status.
• From your viewpoint, who is the most reliable leaseholder?
Who is the most responsible. The most reliable is that who has already tried leases, carefully plans his activity, sees his benefit from using leases and apportions them in a right way.
• Could you tell about new products of the leasing companies like, for instance, express-leasing programs.
In terms of the express-leasing, it is referred to a rapid decision-making, a quick analysis of a client`s solvency. But our company is specialised in the corporate area. It is leasing of infrastructure facilities – their construction by using the lease financing. For instance, the equipment purchase under such terms: 30 % is paid by a client, 70 % is paid by the leasing company. As a result, everyone is happy: a client, having his facility constructed, gets a ready object, earns money with it, pay to the leasing company, and it has a good pledge in the form of a facility in its turn. Furthermore, a definite positive side is: lease property may not be collected by third parties – it is a real security for clients.
• Not so long ago, your company enlarged the team of the Association of Lessors. What is this step driven by?
The aim of this Association is to mainstream the leasing. We are an active player at this market, and consciously decided to join the Association so that our experience could help in promoting the leasing too. We expect to get the adequate information about leases in Ukraine from the Association in order to efficiently plan our further activities. Moreover, the Association may act as a lobbyist in governmental structures – assisting in necessary amendments to be made in the legislation. It should also be noted that our company is a member of the Association board of management.
• It means that your company is in good standing.
We are the largest leasing company in the South Region of Ukraine. I presume it is really interesting to work with us.
• Could you tell us please what programs you offer to agricultural manufacturers in our country?
Classic programs – leasing of agricultural machinery and equipment under the terms of financing from 1 to 5 years, an initial retainer is 20 % of a facility cost. We provide a leaseback service – it is a way to enrich the current assets. Simply stated, a client has his machinery and equipment; we buy it up and lease it out to the same client. Regarding the infrastructure facilities, we construct port elevators associated with the grain storage and transhipment. For the agriculture, a highly-demanded object is lease of grain carriers – it is referred to waggons (rail cars). I`d like to mention that we can observe their deficit, when clients need the rolling stock to be constantly available.
• What are the perspectives of the leasing market development in Ukraine for the market and clients?
The market is growing, and there are major business development perspectives. People become more literate, start counting, saving. The main competitors of the leasing companies are banks, not other leasing companies. If an overall lending increase comes, the leasing will increase as well. It is especially related to the agricultural sector and shipping. Clients will have an opportunity to select leasing companies. In their turn, the leasing companies will make compromises, offer more friendly terms. In Europe, the residential property leasing works well. Simply stated, a client comes, chooses an apartment, makes a pre-payment, pays lease payments, and becomes an apartment owner after all payments are made. During the leasing term, there is an opportunity to sell, change an apartment and herewith to stay a client of the leasing company. In Ukraine, in Kyiv and in our region, in particular, it is a very perspective direction. I think who will be the first in this, will have a big future.
Article published in “Ukraine Business” http://www.ukrbizn.com/interview/1959-kompaniya-tekom-lizing-12-let-aktivnyy.html